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Challenges mushroom for embattled HDG Mansur chief

November 1, 2014

Most of the real estate developers who have left a big stamp on Indianapolis have had an audacious streak. That was certainly true of Mansur principals Harold Garrison and Cornelius Alig, whose headline-grabbing projects downtown included construction of Market Tower and the redevelopment of Lockerbie Marketplace and the Omni Severin Hotel.

Garrison upped his ambitions even more after parting ways with Alig in the early 2000s, with Alig taking the Mansur name and Garrison adopting the HDG Mansur moniker. Garrison invested across the globe—from Europe and East Asia to Australia—making some of those bets through a $2 billion fund he created that was compliant with Islamic Sharia law.

After flying so high, Garrison had a long way to fall, and he’s taken quite a tumble. His real estate empire is on the ropes, with numerous affiliated companies in bankruptcy, and Garrison himself sought personal bankruptcy last month.

Worse, as IBJ reported this summer, Garrison and HDG Mansur are the subjects of a federal criminal investigation into whether they took $5.8 million from a client. The inquiry began after a New York federal judge last year sided with the plaintiffs in a civil lawsuit over the dispute, concluding HDG Mansur appeared to commit “a massive theft on the flimsiest of pretexts.”

Those plaintiffs, two Cayman Islands-based funds, aren’t alone in howling fraud. A year ago, KFH Capital Investment Co. and Kuwait Finance House Real Estate Co. filed a lawsuit in the United Kingdom accusing Garrison and HDG Mansur of misappropriating more than $11 million in connection with a failed development called Finzels Reach in Bristol, England.

That suit says an HDG Mansur affiliate “has taken steps demonstrably intended to hide the fact and extent of that misappropriation, by bringing into existence false invoices and by falsely describing those invoices in the records of the project companies.”

Court papers show that, since April, the Boston-based law firm Mintz Levin Cohn Ferris Glovsky and Popeo has racked up $259,000 in fees representing Garrison, 66, in civil litigation, as well as the criminal inquiry and a separate Securities and Exchange Commission investigation. In the same span, the New York-based law firm Matalon Shweky Elman has billed $79,000 for representation of Brian Reeve, HDG Mansur’s director of accounting, in those matters.

Mintz Levin partner Francis Earley and Matalon partner Howard Elman declined to comment.

Bankruptcy battles

Back in Indianapolis bankruptcy court, the legal landscape for Garrison is almost as rocky. The Cayman Islands funds, which now are angling for payment of their $5.8 million judgment in bankruptcy proceedings, charged in an August filing that HDG Mansur and Garrison have improperly drained millions of dollars from insurance policies that otherwise might have gone toward paying what they’re owed.

A month later, federal bankruptcy Judge James Carr turned up the heat further, appointing an examiner to, among other things, “prosecute any claims” against Garrison or affiliated companies or trusts. The order does not specify the nature of the inquiry that will be conducted by John Humphrey, a partner at Taft Stettinius & Hollister.
 

Harold Garrison Garrison

The court did not go along with a push by creditors to convert the bankruptcy of the HDG Mansur companies from Chapter 11 reorganizations to Chapter 7 liquidations. The creditors argued the businesses have no hope of reorganizing and continuing to attempt to keep them afloat will merely chew up resources.

Michael Hile, a Katz & Korin attorney representing the companies, was able to stave off the creditors, in part by assuring in a court filing that “significant progress has … been made toward a plan of reorganization and a global settlement of claims.”

But some creditors are skeptical. The Cayman Islands funds noted in an October filing that the HDG Mansur companies in bankruptcy have only about $10,000 in cash on hand—far less than the $220,000 Katz & Korin has so far billed for legal fees but not been paid.

“There is no obvious path to administrative solvency on any basis,” a filing by the funds asserts. The funds say they are “highly concerned that continuation of these chapter 11 cases will destroy any chance they may have had for a meaningful recovery of their claims.”•
 

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